Reserve, Absolute, Minimum? What’s that?

Hey! I’m back! Hopefully you’ve gotten over being confused about the main types of auctions, because now I’ve got a few more auction types for you. Today, we’ll discuss reserve auctions, absolute auctions, and minimum bid auctions. Ready? Good!

Reserve Auction: Have you ever had a reservation over something you had to decide? Or booked a reservation at a hotel? Perhaps reserved a place for your friend next to you in the lunch room? Well, then you have a sense of what a reserve auction is. When something is reserved, it is held in place until certain conditions are met.

At a reserve auction, the item up for bid has a reserve price: a hidden price that must be met before the item is allowed to be sold. It’s the minimum amount that a seller is willing a accept for his item that’s up for auction. The seller is under no obligation to sell unless the reserve has been met. When bidding on-line, you will see an obvious icon showing either “Reserve not yet met” or “Reserve met”. Just like any on-line auction, you should probably place your maximum bid, otherwise you risk being outbid by another bidder. If your maximum bid exceeds the reserve (which you don’t know), the program will find the bid increment closest to the reserve price and bid that for you. Confused yet? I’m sure that was clear as mud. SO…let’s look at it this way.

Bob goes to Hueckman Auction’s website and sees a trilobite (that’s Wisconsin’s state fossil!) that he would like to add to his collection. He sees that he has almost 1 day left to bid, that the next bid increment is $10. Bob also sees the words “Reserve Not Met” in bold blue print next to the bidding box.

Bob doesn’t know that Luanne is selling the trilobite and that she has decided that she needs to get at least $10 for this specimen and so has set a reserve price of $10. If the bidding doesn’t reach this amount, she doesn’t want to sell the trilobite, and is under no obligation to sell it.

Bob decides that he really likes the trilobite and wants it, no matter what. (What? That could happen…). So he places a maximum bid of $100 on the trilobite. Remember, this doesn’t mean that Bob will HAVE to pay that much, just that he’s willing to pay that much. The computer sees that Bob has a maximum bid higher than the reserve, so it will make Bob bid $10 (or slightly more depending on the program–some go to the next higher bid increment). Then the words “Reserve not met” change to “reserve met”. At that point, Luanne HAS to sell it to Bob, unless he gets outbid by some other adventure seeing-trilobite hunter. Which could also happen…maybe…

Absolute Auction: I’m absolutely positive that you want to hear about this one. (Hee hee.) At an absolute auction, the item is sold, or awarded to the highest bidder, regardless of the final price. While this sounds absolutely obvious, not all auctions run this way. But an absolute auction does. Absolutely. (Ok…I’m absolutely running away with that word…mostly because it’s fun to say. Try it: Ab-so-LUTE-ly. See it’s fun to say. I digress…) In this type of auction, there is no reserve; there is no minimum bid amount that must be reached in order to sell an item. This usually creates a happy & healthy selling/buying medium (the seller is happy with what he gets for his item, and the buyer is happy with the price he pays). But this means that you might be able to buy a $140,000 house for only $55,000 because there was no reserve price set. Wasn’t that a great deal? Absolutely! (I couldn’t resist saying it one more time!)

Minimum Bid Auctions: In a minimum bid auction, the auctioneer will set a minimum amount that must be bid in order for the item to be sold at auction. For instance, an auctioneer might insist that he will not take a bid lower than $5 for a box of toy trains. That’s the minimum bid. He won’t take a bid of $1, like some folk like to do. If he can’t get someone to start the bidding at $5, he’ll set the trains aside and move on to the next item.

Did this help you? I absolutely hope that you hold no reservations, no matter how minimal, about types of auctions. (Clever, eh?) If you do have questions, send us a note and we’ll try to answer it the best we can.

2 thoughts on “Reserve, Absolute, Minimum? What’s that?”

I have ABSOLUTELY no interest in auctioning of any sort at this time but I read the entire blog! You ask why on earth? Simple: The ABSOLUTELY delightfully witty humor was too good to resist after I stumbled onto the page in error!!